LG Electronics India (P) Ltd., New Delhi V. ACIT, Noida

ITA 3613/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7102 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 05-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Capital asset; Transfer pricing; Business expenditure; Double taxation relief; Opportunity of being heard; International transaction; Source of fund; Permanent establishment; Non-deduction of tax; Bad and doubtful debts; Deemed dividend; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 37(1); 194C; 201(1); 263; 12; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH I-2, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NOS.3612 & 3613/DEL/2017 ASSESSMENT YEARS : 2005-06 & 2006-07 LG ELECTRONICS INDIA (P) LTD., A- WING (3 RD FLOOR), D- 3, DISTRICT CENTER SAKET, NEW DELHI. VS. ACIT, CIRCLE- NOIDA, NOIDA. PAN : AAACL1745Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY VOHRA, SR.ADV. SHRI NEERAJ JAIN, ADV. SHRI ADITYA VOHRA, ADV. SHRI RAMIT KATYAL, ADV. DEPARTMENT BY : SHRI H. K. CHOUDHARY, CIT-DR DATE OF HEARING : 19-04-2018 DATE OF PRONOUNCEMENT : 18-07-2018 O R D E R PER R. K. PANDA, AM : THE ABOVE TWO APPEALS FILED BY THE ASSESSEE ARE DIR ECTED AGAINST THE COMMON ORDER DATED 31.03.2017 OF THE CIT(A)- I, NOI DA, UTTAR PRADESH RELATING TO ASSESSMENT YEARS 2005-06 & 2006-07 RESPECTIVELY. SINCE COMMON GROUNDS ARE INVOLVED IN BOTH THE APPEALS, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 ITA NO.3612/DEL/2017 (A.Y. 2005-06) : 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A PRIVATE LIMITED COMPANY ENGAGED IN TRADING, MANUFACTURING, MARKETIN G AND SALE OF ELECTRONICS, HOME APPLIANCES, IT PRODUCTS, SUPPLY AND INSTALLATI ON OF WLL SYSTEMS, TERMINALS AND GSM MOBILE HANDSETS AND MAINTENANCE, REPAIR AND SERVICING OF CDMA NETWORKS, CDMA/GSM TERMINALS AND MOBILE HANDSE TS. IT FILED ITS RETURN OF INCOME ON 29.10.2005 DECLARING TOTAL INCO ME OF RS.1,52,98,08,547/-. SUBSEQUENTLY, THE ASSESSEE FILED A REVISED RETURN D ECLARING TOTAL INCOME OF RS.1,02,78,01,120/- AFTER CLAIMING THE RECEIPT OF R S.57,71,79,709/- FROM SALES TAX DEPARTMENT AS CAPITAL RECEIPTS. SINCE THE ASSE SSEE HAS UNDERTAKEN CERTAIN INTERNATIONAL TRANSACTIONS WITH ITS AES, THE ASSESS ING OFFICER REFERRED THE MATTER TO THE TPO U/S 92CA(1) OF THE I.T. ACT. THE TPO VI DE ORDER DATED 31.10.2008 SUGGESTED UPWARD ADJUSTMENT OF RS.5,12,44,116/- BEI NG THE ARMS LENGTH PRICE OF THE INTERNATIONAL TRANSACTIONS OF CONTRIBUTION T OWARDS WORLD CUP TOURNAMENT AND AN AMOUNT OF RS.18,66,31,111/- BEING THE ARMS LENGTH PRICE OF THE REIMBURSEMENT OF ADVERTISING, MARKETING AND SALES P ROMOTION EXPENSES. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 143( 3) ON 30.12.2008 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 3,34,18,55,880/- AFTER ALLOWING DEDUCTION OF RS.1,21,50,770/- U/S 80JJAA O F THE I.T. ACT, 1961 AS AGAINST RS.2,52,29,510/- CLAIMED BY THE ASSESSEE IN THE ORIGINAL RETURN OF 3 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 INCOME. THE ASSESSING OFFICER IN THE ASSESSMENT MA DE VARIOUS ADDITIONS UNDER DIFFERENT HEADS. 3. THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT( A) WHO VIDE ORDER DATED 31.03.2017 NOT ONLY CONFIRMED THE VARIOUS ADDITIONS MADE BY THE ASSESSING OFFICER BUT ALSO ENHANCED THE INCOME OF THE ASSESSE E BY RS.2,10,22,81,553/- BY DISALLOWING EXPENDITURE INCURRED ON ACCOUNT OF PROC UREMENT OF RAW MATERIALS FROM THIRD PARTY VENDORS U/S 40(A)(IA) OF THE I.T. ACT. 4. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5. THE GROUND NO.1 BEING GENERAL IN NATURE IS DISMI SSED. 6. IN GROUND NO.2 TO 2.11, THE ASSESSEE HAS CHALLEN GED THE ORDER OF THE LD. CIT(A) IN ENHANCING THE INCOME OF THE ASSESSEE U/S 251(1)(A) BY RS.241,53,75,866/- BY DISALLOWING THE EXPENDITURE I NCURRED ON ACCOUNT OF PROCUREMENT OF MATERIALS FROM THIRD PARTY VENDORS U /S 40(A)(IA) OF THE I.T. ACT. 7. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS ING OFFICER DID NOT MAKE ANY ADDITION IN THE ASSESSMENT PROCEEDINGS ON THIS ACCO UNT. DURING THE COURSE OF APPELLATE PROCEEDINGS, LD. CIT(A) OBSERVED THAT THE ASSESSEE HAS ENTERED INTO TRANSACTIONS WITH DOMESTIC THIRD PARTIES, LGEK AND ITS RELATED PARTIES FOR PURCHASE OF FINISHED GOODS WITHOUT DEDUCTING TAX AT SOURCE. HE, THEREFORE, ISSUED A SHOW-CAUSE NOTICE DATED 15.09.2016 ASKING THE ASSESSEE TO EXPLAIN AS TO WHY THE INCOME SHOULD NOT BE ENHANCED SINCE THE PRO VISIONS OF SECTION 40(A)(IA) 4 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 WERE NOT COMPLIED WITH BY THE ASSESSEE. AFTER CONS IDERING THE ARGUMENTS ADVANCED BY THE ASSESSEE, LD. CIT(A) OBSERVED THAT OUT OF THE TOTAL PURCHASES OF RS.11,13,06,73,826/-, THE ASSESSEE FURNISHED RELEVA NT CERTIFICATE PRESCRIBED UNDER THE SECOND PROVISO TO SECTION 40(A)(IA) READ WITH PROVISO TO SECTION 201(1) OF THE I.T. ACT SUBSTANTIATING THAT THE PAYEES TO T HE EXTENT OF RS.871,52,97,960/- HAVE DISCHARGED THEIR TAX LIABILITY. HE, THEREFORE , MADE THE DISALLOWANCE OF THE BALANCE AMOUNT OF RS.241,53,75,866/- SINCE THE ASSE SSEE WAS UNABLE TO FURNISH NECESSARY DETAILS/CERTIFICATES DEMONSTRATING THAT T HE PAYEES HAD PAID TAX ON THE SAID PAYMENTS. 8. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 9. LD. COUNSEL FOR THE ASSESSEE STRONGLY OBJECTED T O THE ORDER OF THE LD. CIT(A) IN DISALLOWING THE PAYMENT OF RS.241,53,75,8 66/- BY ENHANCING THE ASSESSMENT. LD. COUNSEL FOR THE ASSESSEE AT THE OU TSET SUBMITTED THAT THE POWERS OF ENHANCEMENT AVAILABLE WITH THE LD. CIT(A) DO NOT EXTEND TO DISCOVERING NEW SOURCES OF INCOME. REFERRING TO THE DECISIONS OF T HE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SHAPOORJI PALLONJI MISTRY REPOR TED IN 44 ITR 891 AND IN THE CASE OF CIT VS. RAI BAHADUR HARDUTROY MOTILAL CHAMA RIA REPORTED IN 66 ITR 443, HE SUBMITTED THAT THE HONBLE APEX COURT HAS C ATEGORICALLY HELD THAT THE LD. CIT(A) HAS NO JURISDICTION TO TRAVEL BEYOND THE SUBJECT-MATTER OF ASSESSMENT AND POWERS OF ENHANCEMENT RELATE ONLY TO THAT INCOM E WHICH HAS BEEN SUBJECTED 5 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 TO ASSESSMENT AND NOT TO NEW SOURCES OF INCOME. RE FERRING TO THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. SARDARI LAL AND COMPANY REPORTED IN 251 ITR 864 AND IN THE CASE OF CIT VS. UNION TYRES REPORTED IN 240 ITR 556 AND VARIOUS OTHER DECISION, HE SUBMITTED TH AT SIMILAR VIEW HAS BEEN TAKEN IN THE ABOVE DECISIONS. HE ACCORDINGLY SUBMI TTED THAT THE DISALLOWANCE OF EXPENDITURE INCURRED ON PURCHASE OF FINISHED GOODS FROM THIRD PARTY MANUFACTURES ON THE GROUND OF TAX BEING NOT DEDUCTE D AT SOURCE AT THE TIME OF MAKING PAYMENT, WHICH ISSUE WAS NOT RAISED BY THE A SSESSING OFFICER AND WAS NOT SUBJECT-MATTER OF APPEAL BEFORE THE LD. CIT(A), THEREFORE, DISALLOWANCE IN RESPECT OF THE SAME WAS BEYOND THE JURISDICTION OF THE LD. CIT(A) U/S 251(1) OF THE I.T. ACT. 10. IN HIS ALTERNATE SUBMISSION, HE SUBMITTED THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE PURCHASED FINISHED GO ODS FROM INDEPENDENT, DOMESTIC THIRD PARTY MANUFACTURES AS WELL AS LGEK A ND ITS RELATED ENTITIES, WHICH WERE MANUFACTURES AS PER THE SPECIFICATIONS A ND REQUIREMENTS PROVIDED BY THE ASSESSEE. THE ASSESSEE HAS UNDERTAKEN TRANS ACTIONS FOR PURCHASE OF FINISHED GOODS, WHICH WERE MANUFACTURED AS PER SPEC IFICATIONS OF THE ASSESSEE BUT NOT FOR CARRYING OUT ANY WORK. HE SUBMITTED TH AT THE AGREEMENTS WITH MANUFACTURES WERE ALSO PLACED ON RECORD BEFORE THE LD. CIT(A) TO DEMONSTRATE THAT THE TRANSACTIONS WERE PURELY IN THE NATURE OF PURCHASE/SALE TRANSACTIONS AND, THEREFORE, NOT SUBJECT TO DEDUCTION OF TAX AT SOURC E U/S 194C OF THE I.T. ACT. HE 6 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 SUBMITTED THAT THE MANUFACTURES WERE INDEPENDENT EN TITIES, WHO CARRIED ON THE ACTIVITY OF MANUFACTURING, BY INDEPENDENTLY PROCURI NG RAW MATERIAL FROM VENDORS ON A PRINCIPAL TO PRINCIPAL BASIS, WHICH ON PRODUCTION WERE SOLD TO THE ASSESSEE UNDER AN INDEPENDENT CONTRACT OF SALE ENTE RED ON PRINCIPAL TO PRINCIPAL BASIS. THE MANUFACTURER CHARGES A COMPOSITE PRICE FOR THE FINISHED GOODS SOLD TO THE ASSESSEE AFTER CHARGING APPLICABLE EXCISE DU TY AND SALES TAX, WHEREVER APPLICABLE. HE REFERRED TO SECTION 194C, THE CBDT CIRCULAR NO.681 DATED 21.02.1994 AND THE SUBSEQUENT CBDT CIRCULAR NO.13/2 006 DATED 13.12.2006 AND SUBMITTED THAT THE GOODS SOLD ARE MANUFACTURED ACCORDING TO SPECIFICATIONS OF THE BUYER IS NOT RELEVANT IN DETERMINING WHETHER THE CONTRACT IS A CONTRACT OF SALE OR WORKS CONTRACT. WHAT IS RELEVANT TO DETERM INE IS PASSING OF PROPERTY/TITLE IN THE GOODS FROM THE VENDOR TO THE BUYER. HE SUBM ITTED THAT IDENTICAL ISSUE WAS RAISED BY THE ASSESSING OFFICER (TDS) FOR ASSESSMEN T YEAR 2001-02 AND 2002-03 WHEREIN AFTER DETAILED ANALYSIS, THE TAX DEMAND WAS DELETED BY ALL THE APPELLATE FORUMS INCLUDING THE HON'BLE SUPREME COURT IN THE C ASE REPORTED AS CIT VS. SILVER OAK LABORATORIES P. LTD. VIDE SLP NO.18012/2 009 WHEREIN THE ASSESSEE WAS ALSO A RESPONDENT. HE SUBMITTED THAT THE DECIS ION OF THE HON'BLE SUPREME COURT SQUARELY APPLIES TO THE YEAR UNDER CONSIDERAT ION INSOFAR AS AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THIRD PARTY MANUF ACTURES DURING THE YEAR UNDER CONSIDERATION ARE SAME AS AGREEMENTS IN EARLIER YEA RS WHICH HAVE BEEN HELD TO BE CONTRACT FOR SALE BY THE APEX COURT AND, THEREFO RE, THE QUESTION OF 7 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 APPLICABILITY OF SECTION 194C ON PAYMENTS FOR PURCH ASE OF FINISHED GOODS DOES NOT ARISE. HE ALSO RELIED ON THE FOLLOWING DECISIO NS :- (I) BDA LTD. VS. ITO, 281 ITR 89 (BOM.). (II) CIT VS. DABUR INDIA LTD., 283 ITR 197 (DEL.). (III) DR. WILLMAR SOCHWADE INDIA (P) LTD., ITA NO. 160/2006 (DEL. HC). (IV) CIT VS. REEBOK INDIA CO., 306 ITR 124 (DEL.). (V) CIT VS. GLENMARK PHARAMCEUTICALS LTD., 324 ITR 199 (BOM.). (VI) DCIT VS. SAMSUNG INDIA ELECTRONICS LTD. (ITA 3703/D/05). (VII) WHIRPOOL INDIA LIMITED VS. JCIT, 109 TTJ 994 (DEL.). (VIII) HERO MOTOCORP LTD. VS. ACIT, ITA NO.1980/DE L/2012 (DEL TRIB.). (IX) ITO (OSD) VS. MAHANAGAR TELEPHONE NIGAM LTD., 166 ITD 631 (DEL TRIB.). (X) H.I. TAMBOLI & CO. VS. ACIT, SATARA [2017] 87 TAXMANN.COM 155 (PUNE TRIB.). 11. HE SUBMITTED THAT SECTION 194C WAS AMENDED BY T HE FINANCE (NO.2) ACT, 2009 W.E.F. 01.10.2009 WHEREBY THE DEFINITION OF W ORK WAS ENLARGED TO INCLUDE CONTRACT FOR MANUFACTURING OR SUPPLYING OF A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM SUCH CUSTOMER. THE SAID AMENDMENT ALSO PROVIDED TH AT CONTRACT FOR CARRYING OUT WORK SHALL NOT INCLUDE CONTRACT FOR MANUFACTURING O R SUPPLYING OF PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. SINCE THE IN THE INSTANT CASE, THE FINISHED GOODS ARE MANUFACTURED BY THE SUPPLIER AS PER THE PRESCRIBED SPECIFICATIONS OF THE ASSESSEE AND THE RAW MATERIAL AND OTHER INGREDIENTS REQUIRED FOR MANUFACTURE ARE SPECIFIED BY THE ASSES SEE IN ORDER TO ENSURE PROPER QUALITY OF THE FINISHED PRODUCTS, AND SINCE SUCH RA W MATERIALS ARE ACQUIRED BY THE VENDOR ON THEIR OWN ACCOUNT AND NOT ON BEHALF O F THE ASSESSEE, THEREFORE, THE 8 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 RIGHT OF OWNERSHIP PASSES TO THE ASSESSEE ONLY AFTE R THE GOODS COME INTO EXISTENCE ON MANUFACTURE AND ARE SUPPLIED TO THE AS SESSEE AS FINISHED GOODS. PRIOR THERETO, THE RISK IN THE GOODS VESTS WITH THE VENDOR/SUPPLIER WERE THE SUPPLIER TO INCUR ANY LOSS SUCH AS ON ACCOUNT OF FI RE, BEFORE PASSING OF TITLE IN THE GOODS, THE SAME WOULD BE BORNE BY THE VENDOR AND NO T BY THE ASSESSEE. SIMILARLY, IF THE VENDOR WERE TO GO BAD OR RECOVERY FROM HIM WAS TO BECOME DOUBTFUL, SAID LOSS WAS TO BE BORNE BY THE SUPPLIER ONLY AND NOT THE ASSESSEE. ALL THE OTHER TERMS OF THE PURCHASE/SALE BETWEEN TH E VENDOR AND SUPPLIER, LIKE PAYMENT TERMS, PERIOD OF DELIVERY, ETC. WERE AGREED INDEPENDENTLY BETWEEN THE SAID TWO PARTIES AND THE ASSESSEE HAD NO SAY IN SAM E. THE CONTRACT BETWEEN THE ASSESSEE AND THE VENDOR IS FOR ACQUISITION OF ASCER TAINED GOODS, THEREFORE, THE CONTRACT IS THUS ONE OF SALE AND NOT A CONTRACT FOR CARRYING OUT WORK. HE ACCORDINGLY SUBMITTED THAT THE PROVISIONS OF SECTIO N 194C ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE AND, THEREFORE, DISAL LOWANCE MADE U/S 40(A)(IA) IS LIABLE TO BE DELETED. 12. IN HIS YET ANOTHER ALTERNATE ARGUMENTS, HE SUBM ITTED THAT THERE WAS A BONA-FIDE BELIEF ON THE PART OF THE ASSESSEE FOR NO N-DEDUCTION OF TAX AT SOURCE FROM SUCH PAYMENTS SINCE IN THE PRIOR YEARS AND SUB SEQUENT YEARS, NO SUCH ADDITION/DISALLOWANCE WAS MADE. REFERRING TO THE D ECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE CIT VS. KOTAK SECURITIES LTD . REPORTED IN 245 CTR 3, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAID D ECISION HAS HELD THAT WHERE 9 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 BOTH REVENUE AND ASSESSEE WERE UNDER BONA-FIDE BELI EF FOR NEARLY A DECADE THAT TAX WAS NOT DEDUCTIBLE AT SOURCE ON PAYMENT OF TRAN SACTION CHARGES, NO FAULT COULD BE FOUND WITH THE ASSESSEE IN NOT DEDUCTING T AX AT SOURCE IN ASSESSMENT YEAR IN QUESTION AND CONSEQUENTLY DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S 40(A)(IA) IN RESPECT OF TRANSACTION CHARGES COU LD NOT BE SUSTAINED. THEREFORE, THE LD. CIT(A) IS NOT JUSTIFIED IN MAKING THE ABOVE ADDITION U/S 40(A)(IA) OF THE I.T. ACT. 13. IN YET ANOTHER ALTERNATE ARGUMENT, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PAYEES HAVE ALREADY PAID THE TAX AND, THER EFORE, NO DISALLOWANCE U/S 40(A)(IA) IS CALLED FOR. REFERRING TO THE DECISION OF THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF JAGRAN PRAKASHAN LTD. VS. DCIT REPORTED IN 345 ITR 288, HE SUBMITTED THAT THE HON'BLE HIGH COURT IN THE SAI D DECISION HAS HELD THAT IN A CASE WHERE TAX HAS NOT BEEN DEDUCTED AT SOURCE, THE SHORT DEDUCTED TAX AT SOURCE CANNOT BE REALIZED FROM THE DEDUCTOR AND THE LIABIL ITY TO PAY SUCH TAX SHALL CONTINUE TO BE WITH THE ASSESSEE DIRECT WHOSE INCOM E HAS TO BE CHARGED AND A PERSON WHO FAILS TO DEDUCT THE TAX AT SOURCE, AT BE ST, IS LIABLE FOR INTEREST AND PENALTY ONLY. SINCE THE PAYEE IN THE INSTANT CASE HAS ALREADY PAID THE TAX DUE ON ITS INCOME, THEREFORE, NO DISALLOWANCE U/S 40(A)(IA ) IS CALLED FOR. WITHOUT PREJUDICE TO THE ABOVE, HE SUBMITTED THAT THE DISAL LOWANCE, IF ANY, HAS TO BE RESTRICTED TO 30% OF THE AMOUNT OF SUCH NON-DEDUCTI ON OF TAX AND THE ENTIRE ADDITION CANNOT BE DISALLOWED U/S 40(A)(IA) OF THE I.T. ACT. FOR THE ABOVE 10 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 PROPOSITION, HE RELIED ON THE DECISION OF THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF SMT. KANTA YADAV, PROP. M/S YADAV TRAVELS V S. ITO VIDE ITA NO.6312/DEL/2016 ORDER DATED 12.05.2017 AND THE DEC ISION OF THE JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF SHRI RAJENDRA YADAV VS. ITO VIDE ITA NO.895/JP/2012 ORDER DATED 29.01.2016 AND IN THE CA SE OF SMT. SONU KHANDELWAL VS. ITO VIDE ITA NO.597/JP/2013 ORDER DA TED 13.05.2016. 14. SO FAR AS PURCHASE FROM LGEK AND RELATED ENTITI ES LOCATED OUTSIDE INDIA IS CONCERNED, HE SUBMITTED THAT THE LD. CIT(A) WHIL E MAKING DISALLOWANCE OF PAYMENTS MADE TOWARDS PURCHASE OF FINISHED GOODS FR OM DOMESTIC THIRD PARTIES ALSO INVOKED DISALLOWANCE U/S 40(A)(IA) R.W.S. 194C OF THE ACT QUA PAYMENTS MADE TO LGEK AND RELATED ENTITIES LOCATED OUTSIDE I NDIA. WHILE HOLDING SO, HE RELIED ON THE TERMS OF PARA 1, 2, 3 AND 5 OF ARTICL E 5 OF THE INDIA-KOREA DTAA. HE SUBMITTED THAT THE LD. CIT(A) WITHOUT AFFORDING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE PROCEEDED WITH SUMMARILY HOLDING TH AT THE OVERSEAS GROUP COMPANIES WERE RESIDENT IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF THE INDIA- KOREA DTAA BY TOTALLY MISCONSTRUING THE FACTUAL MAT RIX AND THE PROVISIONS OF ARTICLE 5 OF THE DTAA. HE SUBMITTED THAT LGEK OR O THER RELATED ENTITIES DID NOT HAVE ANY PERMANENT ESTABLISHMENT (PE) IN INDIA WITHIN THE MEANING OF ARTICLE 5 OF TREATY. HE SUBMITTED THAT HAVING PE O F A FOREIGN COMPANY IN INDIA DOES NOT MAKE SUCH COMPANY A RESIDENT IN INDIA WITH IN THE MEANING OF SECTION 6 OF THE ACT. HE SUBMITTED THAT THE PROVISIONS OF SE CTION 6 ARE PLAIN AND 11 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 UNAMBIGUOUS AND THERE IS NO STIPULATION FOR A FOREI GN COMPANY TO BE CONSIDERED AS RESIDENT IN INDIA, IF SUCH FOREIGN COMPANY HAS P E IN INDIA. HE SUBMITTED THAT THE PROVISIONS OF SECTION 40(A)(IA) R.W.S. 194C ARE APPLICABLE ONLY IN RELATION TO SUM PAYABLE TO A RESIDENT AND NOT TO A NON-RESIDENT . THEREFORE, THE PROVISIONS OF SECTION 40(A)(IA) CANNOT BE INVOKED FOR DISALLOW ANCE OF PAYMENT MADE TO SUCH ENTITIES FOR FAILING TO DEDUCT TAX AT SOURCE U /S 194C OF THE I.T. ACT. THE REVENUE HAS NOT DEMONSTRATED THAT THE EMPLOYEES OF THE ASSESSEE ARE ACTUALLY THE EMPLOYEES AND NOMINEES OF THE SAID OVERSEAS ENT ITIES AND ARE WORKING UNDER THE DIRECT CONTROL AND SUPERVISION OF THE OVERSEAS ENTITIES. RELYING ON VARIOUS DECISIONS, HE SUBMITTED THAT NO DISALLOWANCE U/S 40 (A)(IA) IS CALLED FOR. 15. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). HE SUBMITTED THAT THE POWERS OF THE LD. CI T(A) ARE COTERMINOUS WITH THAT OF THE ASSESSING OFFICER. HE COULD DO WHAT TH E ASSESSING OFFICER HAS FAILED TO DO. HE SUBMITTED THAT ANY ALLOWANCE/DISALLOWANC E U/S 40(A)(IA) IS NOT A NEW SOURCE. IT IS ONLY AN INTERPRETATION OF THE EXISTI NG SOURCE OF INCOME. SINCE THE DISALLOWANCE U/S 40(A)(IA) IS NOT NEW SOURCE OF INC OME, THEREFORE, VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSE SSEE ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. HEAVILY RELYING ON THE ORDER OF THE LD. CIT(A), HE SUBMITTED THAT THESE PURCHASERS ARE TO BE TERMED AS WORKS CONTRACT AND NOT MERE PURCHASE OF GOODS. THE ASSESSEE HAS NOT DEMON STRATED AS TO HOW THE LD. CIT(A)S FINDINGS ARE WRONG OR ERRONEOUS. REFERRIN G TO THE PROVISION OF SECTION 12 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 194C EXPLANATION (IV)(E), HE SUBMITTED THAT AS PER THE SAID PROVISIONS WORK SHALL INCLUDE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PU RCHASED FROM SUCH CUSTOMER. THEREFORE, THIS PROVISION IS CLEARLY APPLICABLE TO THE FACTS OF THE PRESENT CASE. 15.1 AS REGARDS THE ARGUMENTS BY THE LD. COUNSEL FO R THE ASSESSEE THAT THE ASSESSEE WAS UNDER BONA-FIDE BELIEF FOR NON-DEDUCTI ON OF TAX AT SOURCE FROM SUCH PAYMENT IS CONCERNED, HE SUBMITTED THAT THE DE CISION RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE WAS RENDERED UNDER THE PRO VISIONS OF SECTION 194J OF THE I.T. ACT. THEREFORE, THE ASSESSEE CANNOT ESCAP E FROM THE CLUTCHES OF THE LAW ON ACCOUNT OF BONA-FIDE BELIEF. SO FAR AS THE ARGU MENT OF THE LD. COUNSEL FOR THE ASSESSEE THAT PAYEES HAVE PAID THE TAX DUE ON THEIR INCOME IS CONCERNED, HE SUBMITTED THAT THE SAME IS SUBJECT TO VERIFICATION. 15.2 THE LD. COUNSEL FOR THE ASSESSEE, IN HIS REJOI NDER, SUBMITTED THAT THE LD. DR BY MAKING A STATEMENT OF ALLOWANCE OR DISALLOWAN CE IS CREATING A NEW SOURCE BY DISALLOWING SOME EXPENDITURE, WHICH IS GO ING TO INCREASE THE TAXABLE INCOME OF THE ASSESSEE. HE SUBMITTED THAT SUCH TYP E OF ARGUMENT BY THE LD. DR IS NOT IN ACCORDANCE WITH LAW. 15.3 SO FAR AS ARGUMENT OF LD. DR THAT IT IS A CONT RACT AND NOT A SALE IS CONCERNED, HE SUBMITTED THAT A CONTRACT OF SALE IS GOVERNED BY THE SALE OF GOODS ACT. THE SUPPLIERS IN THE INSTANT CASE HAVE PAID T HE SALES-TAX AND EXCISE DUTY ETC. THE RIGHT IN THE GOODS PASSED TO THE ASSESSEE ONLY AFTER THE SALE. 13 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES AND PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LD. CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. IT IS AN ADMITTED FACT THAT THE ASSESSING OFFICER IN THE BODY OF THE ASSESSMENT ORDER HAS NOT DISCUSSED ANYT HING ABOUT THE APPLICABILITY OF THE PROVISIONS OF SECTION 40(A)(IA) ON ACCOUNT O F NON-DEDUCTION OF TAX FROM PAYMENTS MADE ON ACCOUNT OF PROCUREMENT OF MATERIAL FROM THIRD PARTY VENDORS. WE FIND THE LD. CIT(A) DURING THE APPELLATE PROCEED INGS BEFORE HIM HAS ISSUED THE ENHANCEMENT NOTICE FOR SUCH DISALLOWANCE. IT I S THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THAT POWERS OF ENHANC EMENT AVAILABLE WITH THE LD. CIT(A) DO NOT EXTEND TO DISCOVERY OF NEW SOURCES OF INCOME. AS PER THE PROVISIONS OF SECTION 251(1) IN DISPOSING OF APPEAL , THE LD. CIT(A) IN AN APPEAL AGAINST THE ORDER OF ASSESSMENT MAY CONFIRM/REDUCE/ ENHANCE OR ANNUL THE ASSESSMENT. THE HONBLE DELHI HIGH COURT IN THE CA SE OF CIT VS. SARDARI LAL AND CO. (SUPRA) HAS HELD AS UNDER :- LOOKING FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASSESSING OFFICER, THE J URISDICTION TO DEAL WITH THE SAME IN APPROPRIATE CASES MAY BE DEALT WITH UNDER SECTION 1 47/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVA ILABLE TO THE FIRST APPELLATE AUTHORITY. THAT BEING THE POSITION, THE DECISION IN UNION TYRES' CASE [1999] 240 ITR 556 OF THIS COURT EXPRESSES THE CORRECT VIEW AND DO ES NOT NEED RECONSIDERATION. THIS REFERENCE IS ACCORDINGLY DISPOSED OF. 14 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 16.1 THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF RAM INFRASTRUCTURE LTD. VS. JCIT VIDE ITA NO.746/PN/2013 ORDER DATED 30.12.2016 WHILE DEALING WITH AN IDENTICAL ISSUE WHERE THE LD. CIT(A) HAD ENHANCED T HE INCOME OF THE ASSESSEE BY DISCOVERING A NEW SOURCE OF INCOME HAS HELD SUCH AD DITION AS VOID AB-INITIO BY OBSERVING AS UNDER :- 12. IN GROUND NOS. 5 AND 6 THE ASSESSEE HAS ASSAIL ED THE ADDITION OF `7,37,68,681/- MADE U/S. 2(22)(E) OF THE ACT BY THE COMMISSIONER O F INCOME TAX (APPEALS). THE ASSESSING OFFICER IN HIS ORDER HAS NOT TOUCHED UPON THE ISSUE OF DEEMED DIVIDEND. THE COMMISSIONER OF INCOME TAX (APPEALS) HAS OBSERVED T HAT THE ASSESSEE HAS VIOLATED THE PROVISIONS OF SECTION 42 OF THE COMPANIES ACT. THE SUBSIDIARY OF THE COMPANY HAS MADE INVESTMENT IN THE SHARE CAPITAL OF THE ASSESSE E (A HOLDING COMPANY). THE LD. AR OF THE ASSESSEE HAS MADE TWO FOLD SUBMISSIONS. THE FIRST CONTENTION OF THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME TAX (APPEALS) CANNO T MADE ADDITION ON THE BASIS OF NEW SOURCE OF INCOME DURING FIRST APPELLATE PROCEED INGS. THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHAPOORJI PALLONJI MISTRY (SUPRA) HAS HELD THAT AAC IS NOT COMPETENT TO ENHAN CE ASSESSMENT IN APPEAL BY DISCOVERING NEW SOURCE OF INCOME NOT MENTIONED IN R ETURN OR CONSIDER BY THE ASSESSING OFFICER IN ASSESSMENT. THE RELEVANT EXTRA CT OF THE JUDGMENT OF HONBLE APEX COURT IN THE AFORESAID CASE IS AS UNDER: 8THE ONLY QUESTION IS WHETHER IN ENHANCING TH E ASSESSMENT FOR ANY YEAR HE CAN TRAVEL OUTSIDE THE RECORD, THAT IS TO SAY, THE RETURN MADE BY THE ASSESSEE AND THE ASSESSMENT ORDER PASSED BY THE INC OME TAX OFFICER WITH A VIEW TO FINDING OUT NEW SOURCES OF INCOME, NOT DISC LOSED IN EITHER. IT IS CONTENDED BY THE COMMISSIONER OF INCOME TAX THAT TH E WORD ' ASSESSMENT ' HERE MEANS THE ULTIMATE AMOUNT WHICH AN ASSESSEE MU ST PAY, REGARD BEING HAD TO THE CHARGING SECTION AND HIS TOTAL INCOME. I N THIS VIEW, IT IS SAID THAT THE WORDS ' ENHANCE THE ASSESSMENT ' ARE NOT CONFINED T O THE ASSESSMENT REACHED THROUGH A PARTICULAR PROCESS BUT THE AMOUNT WHICH O UGHT TO HAVE BEEN COMPUTED IF THE TRUE TOTAL INCOME HAD BEEN FOUND. T HERE IS NO DOUBT THAT THIS VIEW IS ALSO POSSIBLE. ON THE OTHER HAND, IT MUST N OT BE OVERLOOKED THAT THERE ARE OTHER PROVISIONS LIKE SECTIONS 34 AND 33B, WHIC H ENABLE ESCAPED INCOME FROM NEW SOURCES TO BE BROUGHT TO TAX AFTER FOLLOWI NG A SPECIAL PROCEDURE. THE ASSESSEE CONTENDS THAT THE POWERS OF THE APPELLATE ASSISTANT COMMISSIONER EXTEND TO MATTERS CONSIDERED BY THE INCOME TAX OFFI CER, AND IF A NEW SOURCE IS TO BE CONSIDERED, THEN THE POWER OF REMAND SHOULD B E EXERCISED. BY THE EXERCISE OF THE POWER TO ASSESS FRESH SOURCES OF IN COME, THE ASSESSEE IS DEPRIVED OF A FINDING BY TWO TRIBUNALS AND ONE RIGH T OF APPEAL. 9. THE QUESTION IS WHETHER WE SHOULD ACCEPT THE INT ERPRETATION SUGGESTED BY THE COMMISSIONER IN PREFERENCE TO THE ONE, WHICH HA S HELD THE FIELD FOR NEARLY 37 YEARS. IN VIEW OF THE PROVISIONS OF SECTIONS 34 AND 33B BY WHICH ESCAPED INCOME CAN BE BROUGHT TO TAX, THERE IS REASON TO TH INK THAT THE VIEW EXPRESSED UNIFORMLY ABOUT THE LIMITS OF THE POWERS OF THE APP ELLATE ASSISTANT 15 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 COMMISSIONER TO ENHANCE THE ASSESSMENT HAS BEEN ACC EPTED BY THE LEGISLATURE AS THE TRUE EXPOSITION OF THE WORDS OF THE SECTION. IF IT WERE NOT, ONE WOULD EXPECT THAT THE LEGISLATURE WOULD HAVE AMENDED SECT ION 31 AND SPECIFIED THE OTHER INTENTION IN EXPRESS WORDS. THE INCOME TAX AC T WAS AMENDED SEVERAL TIMES IN THE LAST 37 YEARS, BUT NO AMENDMENT OF SEC TION 31(3) WAS UNDERTAKEN TO NULLIFY THE RULINGS, TO WHICH WE HAVE REFERRED. IN VIEW OF THIS, WE DO NOT THINK THAT WE SHOULD INTERPRET SECTION 31 DIFFERENT LY FROM WHAT HAS BEEN ACCEPTED IN INDIA AS ITS TRUE IMPORT, PARTICULARLY AS THAT VIEW IS ALSO REASONABLY POSSIBLE. 13. THE HONBLE APEX COURT THEREAFTER IN THE CASE O F COMMISSIONER OF INCOME TAX VS. RAI BAHADUR HARDUTROY MOTILAL CHAMARIA (SUPRA) HAS REAFFIRMED ITS VIEW TAKEN IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHAPO ORJI PALLONJI MISTRY (SUPRA). THE HONBLE JUSTICE V. RAMASWAMI SPEAKING FOR THE COURT STATED: AS WE HAVE ALREADY STATED, IT IS NOT OPEN TO THE A PPELLATE ASSISTANT COMMISSIONER TO TRAVEL OUTSIDE THE RECORD, I.E., TH E RETURN MADE BY THE ASSESSEE OR THE ASSESSMENT ORDER OF THE INCOME TAX OFFICER WITH A VIEW TO FIND OUT NEW SOURCES OF INCOME AND THE POWER OF ENHANCEM ENT UNDER SECTION 31(3) OF THE ACT IS RESTRICTED TO THE SOURCES OF INCOME W HICH HAVE BEEN THE SUBJECT MATTER OF CONSIDERATION BY THE INCOME TAX OFFICER F ROM THE POINT OF VIEW OF TAXABILITY. IN THIS CONTEXT ' CONSIDERATION ' DOES NOT MEAN ' INCIDENTAL ' OR ' COLLATERAL ' EXAMINATION OF ANY MATTER BY THE INCOM E TAX OFFICER IN THE PROCESS OF ASSESSMENT. THERE MUST BE SOMETHING IN THE ASSES SMENT ORDER TO SHOW THAT THE INCOME TAX OFFICER APPLIED HIS MIND TO THE PART ICULAR SUBJECT MATTER OR THE PARTICULAR SOURCE OF INCOME WITH A VIEW TO ITS TAXA BILITY OR TO ITS NON TAXABILITY AND NOT TO ANY INCIDENTAL CONNECTION. THE LAW LAID DOWN BY THE HONBLE APEX COURT HAS BEE N REITERATED BY THE FULL BENCH OF THE HONBLE DELHI HIGH COURT IN THE CASE OF COMMISS IONER OF INCOME TAX VS. SARDARI LAL & CO. (SUPRA). THE HONBLE DELHI HIGH COURT HEL D : LOOKING FROM THE AFORESAID ANGLES, THE INEVITABLE CONCLUSION IS THAT WHENEVER THE QUESTION OF TAXABILITY OF INCOME FROM A NEW SOURCE OF INCOME IS CONCERNED, WHICH HAD NOT BEEN CONSIDERED BY THE ASS ESSING OFFICER, THE JURISDICTION TO DEAL WITH THE SAME IN APPROPRIATE C ASES MAY BE DEALT WITH UNDER SECTION 147/148 OF THE ACT AND SECTION 263 OF THE ACT, IF REQUISITE CONDITIONS ARE FULFILLED. IT IS INCONCEIVABLE THAT IN THE PRESENCE OF SUCH SPECIFIC PROVISIONS, A SIMILAR POWER IS AVAILABLE TO THE FIR ST APPELLATE AUTHORITY. THUS, IN VIEW OF THE WELL SETTLED LAW LAID DOWN BY THE HONBLE APEX COURT AND SUBSEQUENTLY FOLLOWED BY THE HONBLE DELHI HIGH COU RT WE HOLD THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS EXCEEDED H IS JURISDICTION IN MAKING ADDITION U/S. 2(22)(E) OF THE ACT AS THERE IS NO RE FERENCE OF SUCH INCOME EITHER IN THE RETURN OF INCOME OR IN THE ASSESSMENT PROCEEDINGS. THUS, THE ADDITION MADE U/S. 2(22)(E) BY COMMISSIONER OF INCOME TAX (APPEALS) IS NOT SUSTAINABLE AND IS THEREFORE SET ASIDE BEING VOID AB-INITIO. SINCE, THE ADDITION MADE BY THE COMMISSIONER OF INCOME TAX (APPEALS) U/S. 2(22)(E) OF THE ACT HAS B EEN HELD TO BE VOID AB-INITIO, THE ARGUMENTS RAISED BY THE LD. AR OF THE ASSESSEE ON M ERITS HAVE BECOME ACADEMIC AND ARE THUS, NOT DEALT WITH. THE GROUND NOS. 5 AND 6 R AISED BY THE ASSESSEE IN GROUNDS OF APPEAL ARE ALLOWED, ACCORDINGLY. 16 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 17. SINCE IN THE INSTANT CASE ALSO, THERE IS NO DIS CUSSION OF ANY SUCH DISALLOWANCE EITHER IN THE RETURN OF INCOME OR IN T HE ASSESSMENT PROCEEDINGS, THEREFORE, THE DISALLOWANCE MADE BY THE LD. CIT(A) BY DISCOVERING A NEW SOURCE OF INCOME IS NOT SUSTAINABLE IN LAW. WE, THEREFORE , HOLD THAT THE DISALLOWANCE MADE BY THE LD. CIT(A) U/S 40(A)(IA) IS VOID AB-INITIO . SINCE WE ARE ALLOWING THE GROUNDS RAISED BY THE ASSESSEE ON THE ISSUE OF ENHA NCEMENT OF ASSESSMENT BY THE LD. CIT(A) BY DISCOVERING A NEW SOURCE OF INCOME, T HE OTHER ALTERNATE ARGUMENTS MADE BY THE LD. COUNSEL FOR THE ASSESSEE BECOME ACADEMIC IN NATURE AND THEREFORE ARE NOT BEING ADJUDICATED. THE GROUN DS NO.2 TO 2.11 ARE ACCORDINGLY ALLOWED. 18. IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN TREATING THE SALES-TAX SUBSIDY OF RS.57,71,79,709/- AS TAXABLE REVENUE RECEIPT, AS AGAINST CAPITAL RECEIPT TREATED BY THE ASSESSEE. 19. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE PRECEDI NG ASSESSMENT YEAR. WE FIND THE TRIBUNAL HAS DISCUSSED THE ISSUE AT PARA 14 OF ITS ORDER AND FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AS SESSMENT YEAR 2002-03 HAS DECIDED THE ISSUE AGAINST THE ASSESSEE BY OBSERVING AS UNDER :- 14. GROUND NO. 8 IS AGAINST THE TREATMENT OF SALES TAX SUBSIDY OF `61,00,79,579/- AS TAXABLE REVENUE RECEIPT. THE FACTS CONCERNING TH IS GROUND ARE THAT THE ASSESSEE TREATED SALES TAX SUBSIDY AS CAPITAL RECEIPT, WHICH WAS HELD BY THE AO TO BE CHARGEABLE TO TAX IN THE NATURE OF REVENUE RECEIPT. IT IS NOTICED THAT THIS ISSUE CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN EARLIER YE ARS. FOR THE FIRST TIME, THE TRIBUNAL DECIDED IT AGAINST THE ASSESSEE FOR THE ASSESSMENT YEAR 2002-03 AND SUCH VIEW HAS BEEN FOLLOWED FOR THE SUBSEQUENT YEARS. IN VIEW OF THE CONSISTENT VIEW TAKEN BY THE 17 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 TRIBUNAL IN DECIDING SALES TAX SUBSIDY AS REVENUE R ECEIPT, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER ON THIS ISSUE. THIS GROUND FAILS. 20. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR, WE DECIDE THE GROUND AGAINST THE ASSESSEE. 21. IN GROUND NO.4, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DI SALLOWING THE PROVISION FOR SERVICE WARRANTY OF RS.10,05,19,000/-. 22. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. WE FIND THE TRIBUNAL FOLLOWING THE ORDER OF THE TRIBUNAL IN ASS ESSEES OWN CASE FOR ASSESSMENT YEARS 2002-03, 2003-04 AND 2004-05 HAS D ECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE PRECED ENT, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ALLOWED. 23. IN GROUND NO.5, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DI SALLOWING ROYALTY AMOUNTING TO RS.88,38,75,000/- PAID TO LG ELECTRONICS INC. KO REA HOLDING THE SAME TO BE CAPITAL EXPENDITURE. 24. THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE A SSESSEE DURING THE YEAR MADE PAYMENT ON ROYALTY TO HIS HOLDING COMPANY M/S LG EL ECTRONICS, KOREA (LGEK) FOR THE RIGHT TO USE TECHNICAL KNOWLEDGE, KNOW-HOW, PROCESS, SPECIFICATIONS, LAY 18 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 OUTS, DESIGNS, DRAWINGS AND QUALITY STANDARD, STAND ARD CALCULATION, ETC.. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASS ESSEE AND RELYING ON VARIOUS DECISION, THE ASSESSING OFFICER TREATED SUCH ROYALT Y PAYMENT AS CAPITAL EXPENDITURE AS AGAINST REVENUE EXPENDITURE TREATED BY THE ASSESSEE. IN APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING O FFICER FOR WHICH ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 25. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. WE FIND THE TRIBUNAL DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSERVING AS UNDER :- 16.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUS ED THE RELEVANT MATERIAL ON RECORD. IN ORDER TO DECIDE AS TO WHETHER THE ROYALT Y PAID BY THE ASSESSEE IS OF A CAPITAL OR REVENUE NATURE, IT IS APPROPRIATE TO SEE THE REL EVANT CLAUSES OF THE AGREEMENT DATED 01.07.2001, PURSUANT TO WHICH SUCH ROYALTY WAS PAID . THE PREAMBLE PART OF THE AGREEMENT STATES THAT THE LICENSOR ALLOWS USE OF TECHNICAL INFORMATION AND INDUSTRIAL PROPERTY RIGHTS FOR THE MANUFACTURE, PRO DUCTION AND SALE OF THE PRODUCTS. ARTICLE 1 OF THE AGREEMENT DEFINES TECHNICAL INFOR MATION TO MEAN ALL THE TECHNICAL KNOWLEDGE, KNOWHOW, PROCESS, SPECIFICATION, LAY OUT S, DESIGNS, DRAWINGS, AND QUALITIES STANDARDS, STANDARDS CALCULATION, DATA AN D INFORMATION DEVELOPED OR OTHERWISE GENERALLY USED BY THE LICENSOR PERTAINING TO THE MANUFACTURE, PRODUCTION, ASSEMBLY, USE AND SALE OF THE AGREED PRODUCTS. ARTI CLE 2 OF THE AGREEMENT STATES THAT: SUBJECT TO THE TERMS AND CONDITIONS SET FORTH IN T HIS AGREEMENT, LICENSOR HEREBY GRANTS TO LICENSEE AN EXCLUSIVE, NONTRANSFERABLE LI CENSE, WITHOUT THE RIGHT TO SUB- LICENSE, AND THE RIGHT TO MANUFACTURE, PRODUCE, USE , SELL, OR OTHERWISE DISPOSE OF THE AGREED PRODUCTS UTILIZING THE TECHNICAL INFORMATION AND/OR INDUSTRIAL PROPERTY RIGHTS FURNISHED BY LICENSOR. ARTICLE 4 OF THE AG REEMENT DEALING WITH ROYALTY PAYMENT STIPULATES THAT: IN CONSIDERATION OF THE U SE OF THE INDUSTRIAL PROPERTY RIGHTS, DESIGNS, TECHNICAL KNOW-HOW, FOR ALL TYPES, SIZES A ND MODELS OF COLOUR TELEVISIONS THAT MAY BE MANUFACTURED IN FUTURE , LICENSEE SH ALL PAY LICENSOR A ROYALTY FEE @ 1% . ARTICLE 7 WITH CAPTION USE OF LG BRAN D NAME & TRADE MARK PROVIDES THAT: THE LICENSOR HEREBY ALLOWS THE LICE NSEE FOR THE USE OF ITS BRAND NAME AND TRADE MARK FOR THE LICENSED PRODUCTS .. ART ICLE 11 OF THE AGREEMENT CONTAINS A TERMINATION CLAUSE. PARA 11.4 OF THE AGR EEMENT WITH MARGINAL NOTE CONFIDENTIALITY STIPULATES THAT: THE LICENSEE SH ALL KEEP SECRET AND CONFIDENTIAL, AND SHALL NOT DIRECTLY OR INDIRECTLY DISCLOSE, DIVULGE OR REVEAL EITHER DURING CONTINUANCE OF THIS AGREEMENT OR AT ANY TIME THEREAFTER, THE CLASS IFIED INFORMATION DISCLOSED, COMMUNICATED OR GIVEN OR GRANTED OR OTHERWISE ACQUI RED BY THE LICENSEE .. PARA 11.3 STIPULATES THAT: UPON THE TERMINATION, A LL THE RESPECTIVE RIGHTS AND 19 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 OBLIGATION OF THE PARTIES HEREUNDER, EXCEPT FOR OBL IGATIONS HAVING ACCRUED TO THE DATE AND THOSE OF A CONTINUING NATURE SUCH AS CONFIDENTI ALITY, SHALL CEASE.. ON AN OVERVIEW OF THE VARIOUS CLAUSES OF THE AGREEMENT, IT TRANSPI RES THAT THE AGREEMENT IS FOR ALLOWING THE USE OF THE TECHNICAL INFORMATION AND IPRS FOR THE MANUFACTURE OF SPECIFIED PRODUCTS. SUCH RIGHTS HAVE BEEN GIVEN EXC LUSIVELY TO THE ASSESSEE. THIS AGREEMENT SIMPLY ALLOWS THE USE OF TECHNICAL INFORM ATION AND IPRS WITHOUT GRANTING ANY OWNERSHIP RIGHTS IN IT TO THE ASSESSEE. FURTHER THE GRANT OF LICENSE TO THE ASSESSEE IS NON-TRANSFERABLE WITH NO RIGHT OF SUB-LICENSING. APART FROM THAT, THERE IS A CONFIDENTIALITY CLAUSE WHICH PROHIBITS THE ASSESSEE FROM DISCLOSING THE INFORMATION RECEIVED PURSUANT TO THIS AGREEMENT, TO ANYONE ELSE EITHER DURING THE CONTINUATION OF THIS AGREEMENT OR AT ANY TIME THEREAFTER. IT IS A P ERPETUAL AGREEMENT WITHOUT THERE BEING ANY FIXED DURATION OF THE LICENSE. THE TERMIN ATION CLAUSE PROVIDES THAT UPON TERMINATION, ALL THE RESPECTIVE RIGHTS AND OBLIGATI ON OF THE PARTIES, NAMELY, THE USE OF TECHNICAL KNOWHOW AND IPRS, SHALL CEASE. IN OTHER W ORDS, THE ASSESSEE WILL NOT BE ENTITLED TO USE THIS TECHNICAL KNOW-HOW OR IPRS AFT ER THE TERMINATION OF THE AGREEMENT. NOW THE MOOT QUESTION WHICH ARISES IS AS TO WHETHER THE ROYALTY PAID FOR THE USE OF TECHNICAL KNOWHOW AND IPRS IN THE GIVEN CIRCUMSTANCES BE HELD AS A CAPITAL EXPENDITURE AS HAS BEEN HELD BY THE AO OR R EVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE. 16.2. THE HONBLE SUPREME COURT IN CIT VS CIBA OF INDIA LTD. (1968) 69 ITR 692 (SC) CONSIDERED A SITUATION IN WHICH THAT ASSESSEE WAS ENABLED TO ACQUIRE THE RIGHT TO DRAW FOR THE PURPOSE OF CARRYING ON ITS BUSINESS AS A MANUFACTURER AND DEALER OF PERMISSIBLE PRODUCTS UPON THE TECHNICAL KNOWLEDGE A VAILABLE FROM THE FOREIGN COMPANY FOR A LIMITED PERIOD WITH STIPULATION NOT T O DIVULGE THE INFORMATION TO THIRD PARTIES AND FURTHER RETURN SUCH INFORMATION ON THE CONCLUSION OF AGREEMENT WITH THE PROHIBITION OF NOT USING THE SAME AFTER TERMINATION OF THE AGREEMENT. THE PAYMENT MADE FOR THIS PURPOSE WAS EVENTUALLY HELD TO BE AN ADMISSIBLE REVENUE EXPENDITURE. IN THAT CASE THE INFORMATION SUPPLIED WAS TO BE SURREN DERED ON THE TERMINATION OF THE AGREEMENT AND NOT TO BE PUT TO USE THEREAFTER. IN C IT VS I.A.E.C (PUMPS) LTD. (1998) 232 ITR 316 (SC), THE HONBLE SUPREME COURT CONSIDE RED A CASE IN WHICH PAYMENT WAS MADE FOR USE OF PATENTS AND DESIGNS EXCLUSIVELY IN INDIA; THE AGREEMENT WAS FOR A DURATION OF 10 YEARS WITH THE PARTIES HAVING OPTION TO EXTEND THE AGREEMENT; THERE WAS A CLAUSE FOR NON-DISCLOSURE TO THE THIRD PARTIE S. IN VIEW OF THESE FACTS, THE HONBLE APEX COURT HELD THAT THE EXPENDITURE INCURRED WAS O NLY A REVENUE EXPENDITURE BECAUSE WHAT WAS OBTAINED BY THE ASSESSEE WAS ONLY A LICENCE AND WHAT WAS PAID BY THE ASSESSEE WAS ONLY A LICENCE FEE AND NOT THE PRI CE FOR ACQUISITION OF ANY CAPITAL ASSET. IN CIT VS INDIAN OXYGEN LTD. (1996) 218 ITR 337 (SC), THE ASSESSEE ENTERED INTO AGREEMENT FOR THE USE OF INFORMATION, PROCESSE S OR INVENTION AND WAS PROHIBITED FROM DISCLOSING THEM AFTER TERMINATION OF AGREEMENT AND FURTHER THE AGREEMENT WAS TERMINABLE EVEN PRIOR TO THE PERIOD SPECIFIED THERE IN. THE PAYMENT SO MADE WAS HELD TO BE OF REVENUE NATURE. IN CIT VS WAVIN (INDIA) LT D. (1996) 236 ITR 314 (SC), PAYMENT MADE BY THAT ASSESSEE WAS UNDER NONEXCLUSIV E AND NON-TRANSFERABLE AGREEMENT FOR THE USE OF TECHNICAL INFORMATION, WHI CH WAS HELD BY THE HONBLE SUPREME COURT AS A REVENUE EXPENDITURE. 16.3. IN CONTRAST TO ABOVE DECISIONS HOLDING PAYMEN T OF ROYALTY AS A REVENUE EXPENDITURE, THERE IS A LINE OF JUDGMENTS HOLDING T HE PAYMENT OF ROYALTY AS A CAPITAL EXPENDITURE. IN JONAS WOODHEAD & SONS LTD. VS CIT ( 1997) 224 ITR 342 (SC), THE ASSESSEE SET UP A NEW BUSINESS AND THE FOREIGN FIRM , IN ADDITION TO SUPPLYING TECHNICAL KNOWHOW, ALSO RENDERED VALUABLE SERVICES IN SETTING UP THE FACTORY ITSELF AND THE 20 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 ASSESSEE WAS ALLOWED TO MANUFACTURE THE PRODUCTS EV EN AFTER THE EXPIRY OF THE AGREEMENT. THE HONBLE SUPREME COURT HELD THAT 25% OF THE ROYALTY WAS A CAPITAL EXPENDITURE. IN SOUTHERN SWITCHGEAR LTD. VS. CIT AN D ANR. (1998) 232 ITR 359 (SC), THE FOREIGN COMPANY PROVIDED TECHNICAL KNOWHOW AND OTHER SERVICES TO THE ASSESSEE COMPANY. THE TECHNICAL ASSISTANCE ALSO CONTEMPLATED ESTABLISHMENT OF A FACTORY. ON THE EXPIRY OF AGREEMENT AFTER 5 YEARS, THE ASSESSEE COULD USE METHOD OF PRODUCTION, PROCEDURE ETC. IN THE BACKDROP OF THESE FACTS, THE HONBLE SUPREME COURT HELD THAT THE PAYMENT WAS MADE BY THE INDIAN ASSESSEE FOR ACQ UISITION OF KNOWLEDGE WHICH WAS OF ENDURING NATURE AND HENCE A CAPITAL EXPENDITURE. 16.4. AN ANALYSIS OF THE ABOVE JUDGMENTS RENDERED BY THE HONBLE SUMMIT COURT CLEARLY BRINGS OUT THAT WHEREAS THE PAYMENT MADE FO R ACQUISITION OF TECHNICAL KNOW- HOW ETC. ON OWNERSHIP BASIS IS A CAPITAL EXPENDITUR E, THE PAYMENT MADE FOR USE OF SUCH TECHNICAL KNOW-HOW IS A REVENUE EXPENDITURE. A DIVIDER IN THE CAPITAL AND REVENUE EXPENDITURE IN THE CIRCUMSTANCES AS ARE PRE SENTLY PREVAILING CAN BE PLACED BY ASCERTAINING THE CORRECT NATURE OF THE RIGHT VESTED IN THE LICENSEE. IF LICENSEE IS ALLOWED NOT ONLY THE SIMPLICTOR USE OF TECHNICAL KN OW-HOW, BUT SUCH USE IS COUPLED WITH THE DIVESTING OF OWNERSHIP IN FAVOUR OF THE US ER, THEN IT CAN BE CONSIDERED AS A CASE OF CAPITAL EXPENDITURE. IF ON THE OTHER HAND, THE LICENSEE IS ALLOWED A SIMPLE USE WITHOUT ANYTHING ELSE, THEN IT CAN BE ONLY A REVENU E EXPENDITURE. THE MERE FACT THAT THE EXPENDITURE IS RESULTING INTO BESTOWING A BENEF IT OF ENDURING NATURE IN THE SHAPE OF USER OF TECHNICAL KNOW-HOW, WITH WHOSE ASSISTANCE T HE ASSESSEE IS CARRYING ON ITS MAIN ACTIVITY OF BUSINESS, CANNOT BE THE SOLE DETER MINATIVE TEST OF THE NATURE OF EXPENDITURE. THE HONBLE APEX COURT IN EMPIRE JUTE CO. LTD. VS. CIT (1980) 124 ITR 1 (SC) HAS HELD THAT THERE MAY BE CASES WHERE EXPEN DITURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE OF ENDURING BENEFIT, MAY, NONE THE LESS, BE ON REVENUE ACCOUNT AND THE TEST OF ENDURING BENEFIT MAY BREAK DOWN. TH EIR LORDSHIPS EMPHATICALLY LAID DOWN THAT : IF THE ADVANTAGE CONSISTS MERELY IN FA CILITATING THE ASSESSEE'S TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT O F THE ASSESSEE'S BUSINESS TO BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY WHIL E LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCO UNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. THUS, IT FOLL OWS THAT IF AN ASSESSEE GETS BENEFIT OF ENDURING NATURE BY INCURRING THE EXPENDITURE, BUT S UCH BENEFIT SIMPLY FACILITIES THE CARRYING ON THE BUSINESS IN A MORE PROFITABLE MANNE R WITHOUT ENHANCING THE FIXED CAPITAL BASE, IT WILL BE A CASE OF REVENUE EXPENDIT URE. IF ON THE OTHER HAND, THE EXPENDITURE RESULTS INTO ACQUISITION OF ASSET AS AN OWNER AND NOT AS A MERE USER, WHICH AUGMENTS THE FIXED CAPITAL BASE, THE PAYMENT IS A CAPITAL EXPENDITURE. 16.5. ARMED WITH THE ABOVE LEGAL POSITION, WE NEED TO ASCERTAIN IF THE ASSESSEE ACQUIRED USE AS WELL AS OWNERSHIP OF TECHNICAL KNOW -HOW ETC. OR WAS ALLOWED A SIMPLE USE DEVOID OF OWNERSHIP. IN ORDER TO DECIDE THIS ISSUE, ALL THE ATTENDING FACTS AND CIRCUMSTANCES OF THE CASE NEED TO BE VIEWED. SO ME OF THE FACTORS OF RELEVANCE IN DECIDING THE OVERALL QUESTION AS TO WHETHER THE PAY MENT IS CAPITAL OR REVENUE CAN BE, THE EXCLUSIVE OR NONEXCLUSIVE USE; FIXED OR PERPETU AL TENURE OF THE AGREEMENT FOR TRANSFER OF THE TECHNICAL KNOWHOW; THE AVAILABILITY OR OTHERWISE OF TECHNICAL KNOWHOW AFTER THE TERMINATION OF THE AGREEMENT; PURSUANT TO THE SURRENDERING OF SUCH TECHNICAL KNOW-HOW ON THE TERMINATION OF THE AGREEMENT, THE E XISTENCE OR OTHERWISE OF RIGHT TO USE TECHNICAL KNOWLEDGE WHICH THE LICENSEE MAY HAVE IMBIBED DURING THE CURRENCY OF THE AGREEMENT; THE EXISTENCE OR OTHERWISE OF CONFID ENTIALITY CLAUSE IN THE AGREEMENT DEBARRING THE LICENSEE FROM SHARING IT WITH OTHERS DURING THE CONTINUANCE OF THE AGREEMENT OR THEREAFTER. IN FACT, THERE CAN BE NO S INGLE CONCLUSIVE TEST FOR DECIDING 21 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 THE NATURE OF ROYALTY PAYMENT AS TO WHETHER IT IS R EVENUE OR CAPITAL. IT IS THE CUMULATIVE EFFECT OF ALL THE ABOVE DISCUSSED FACTOR S WHICH HELPS IN ASCERTAINING THE TRUE NATURE OF ROYALTY PAYMENT. 16.6. WHEN WE COME BACK TO THE FACTS OF THE INSTAN T CASE IT IS OBSERVED THAT THE FACTORS WHICH WEIGH IN FAVOUR OF THE ASSESSEE ARE T HAT THE LICENSE WAS GIVEN ON NON- TRANSFERABLE BASIS; THERE IS A CONFIDENTIALITY CLAU SE PROHIBITING THE ASSESSEE FROM DIVULGING THE RELEVANT INFORMATION DURING CONTINUAT ION OF THE AGREEMENT OR ANY TIME THEREAFTER; ON THE TERMINATION OF THE AGREEMENT, RE SPECTIVE RIGHTS OR OBLIGATIONS UNDER THE AGREEMENT SHALL CEASE; AND THERE IS NO POWER WI TH THE ASSESSEE TO SUB-LICENSE. ON THE OTHER HAND, THE FACTORS WHICH WEIGH AGAINST THE ASSESSEE ARE THAT THE LICENSE IS EXCLUSIVELY GRANTED TO THE ASSESSEE; AND THE LICENS E IS NOT FOR A LIMITED PERIOD BUT PERPETUAL. ON CONSIDERING THE CUMULATIVE EFFECT OF ALL THE FACTORS, BOTH FOR AND AGAINST THE ASSESSEE, WE HAVE NO HESITATION IN HOLDING SUCH ROYALTY PAYMENT TO BE OF A REVENUE NATURE. THE REASON IS OSTENSIBLE, BEING THE FACTORS POINTING TOWARDS REVENUE EXPENDITURE PREDOMINANTLY OVERSHADOWING THE FACTORS POINTING AGAINST REVENUE EXPENDITURE. THE FACTORS WHICH ARE AGAINST THE ASSE SSEE ARE ALBEIT MATERIAL, BUT STAND OUTSHINED BY THE FACTORS WHICH ARE IN FAVOUR OF THE ASSESSEE. IT IS A CASE OF ROYALTY PAYMENT IN LIEU OF THE USE OF LICENSE DEVOID OF C ONFERRING ANY OWNERSHIP RIGHTS IN THE LICENSEEASSESSEE. 16.7. THE JUDGMENT IN THE CASE OF RAM KUMAR PHARMA CEUTICAL WORKS VS. CIT (1979) 119 ITR 33 (ALL) AS RELIED BY THE AO IS NOT GERMANE TO THE ISSUE UNDER CONSIDERATION. IN THAT CASE, ROYALTY WAS PAID FOR A CQUIRING OWNERSHIP OF KNOW-HOW AND WAS HENCE HELD TO BE AN EXPENDITURE INCURRED TO OBTAIN A RIGHT OF AN ENDURING NATURE. WE FURTHER FIND THAT THE HONBLE JURISDICTI ONAL HIGH COURT IN A LATER CASE OF CIT VS. PREM HEAVY ENGG. WORKS (P) LTD. (2006) 282 ITR 11 (ALL) HAS HELD THE PAYMENT FOR ACQUIRING TECHNICAL KNOW-HOW FOR MANUFA CTURE OF PLANT AND NOT FOR ESTABLISHMENT OF FACTORY ITSELF FOR A PERIOD OF SEV EN YEARS, AS A REVENUE EXPENDITURE. 16.8. WE, THEREFORE, SUM UP OUR CONCLUSION BY HOLD ING THAT THAT THE TOTAL ROYALTY PAYMENT, AS REDUCED BY THE TRANSFER PRICING ADJUSTM ENT ON THIS SCORE, BE TREATED AS A REVENUE EXPENDITURE. THIS GROUND IS ALLOWED. 26. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIB UNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08, WE HOLD THAT THE TOTAL ROYALTY PAYMENT AS REDUCED BY THE TRANSFER PRICING ADJUSTMENT ON THIS SCORE BE TREATED AS REVENUE EXPENDITURE. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED. 27. IN GROUND NO.6, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DI SALLOWING THE EXPORT 22 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 COMMISSION OF RS.3,23,54,000/- PAID TO LG ELECTRONI CS INC. KOREA HOLDING THE SAME AS NOT GENUINE BUSINESS EXPENDITURE. 28. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FAIRLY CONCEDED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE. THEREFORE, THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS DISMISSED. 29. IN GROUND NO.7, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN DI SALLOWING THE CLAIM OF BAD DEBTS OF RS.2,13,72,159/-. 30. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE CLAIMED EXPENDITURE OF RS.2,13,72,159/- ON ACCOUNT OF BAD DEBTS WRITTEN OF F. THE ASSESSING OFFICER DISALLOWED THE SAME WHICH WAS UPHELD BY THE LD. CIT (A). IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT S WERE ACTUALLY WRITTEN OFF BY THE ASSESSEE DURING THE RELEVANT PREVIOUS YEAR. RE LYING ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TRF LTD. VS. C IT REPORTED IN 323 ITR 397, HE SUBMITTED THAT THE BAD DEBTS WRITTEN OFF SH OULD BE DELETED. WE FIND THE LD. CIT(A) REJECTED THE CLAIM OF THE ASSESSEE ON TH E GROUND THAT THE ASSESSEE HAS NOT MADE OUT ANY CASE EXCEPT MAKING A BALD CLAIM TH AT IT HAS FULFILLED THE REQUIREMENT OF SECTION 36(1)(VII) OR 36(2) OF THE I .T. ACT. SINCE THE ASSESSEE IS REQUIRED TO FULFILL THE TWIN CONDITIONS, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE, W E DEEM IT PROPER TO RESTORE THE 23 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO GIVE ONE MORE OPPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE THE CLA IM OF ALLOWABILITY OF BAD DEBTS. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 31. IN GROUND NO.8 & 8.1, THE ASSESSEE HAS CHALLENG ED THE ORDER OF THE LD. CIT(A) IN UPHOLDING THE ACTION OF THE ASSESSING OFF ICER IN DISALLOWING THE CLAIM OF DEDUCTION U/S 80JJAA. 32. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET FAIRLY CONCEDED THAT THIS ISSUE IS DECIDED AGAINST THE ASSESSEE BY THE TRIBUN AL IN ASSESSEES OWN CASE IN EARLIER YEARS AND IN ASSESSMENT YEAR 2007-08. IN V IEW OF THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE, GROUND NO.8 & 8.1 ARE DISMISSED. 33. THE GROUND NO.9 & 9.1 WAS NOT PRESSED BY THE LD . COUNSEL FOR THE ASSESSEE ON THE GROUND THAT THE ASSESSING OFFICER HAS ALREAD Y PASSED ORDER U/S 154 AND THE DISALLOWANCE WAS DELETED. THE ABOVE GROUND WAS DISMISSED AS NOT PRESSED. 34. GROUND NO.10 BEING GENERAL IN NATURE IS DISMISS ED. 35. GROUND NO.11 IS CO-RELATED TO GROUNDS NO.2 TO 2 .11 WHEREIN THE LD. CIT(A) HAS ENHANCED THE ASSESSMENT BY MAKING DISALL OWANCE U/S 40(A)(IA). WE HAVE ALREADY ADJUDICATED THIS GROUND. THEREFORE, T HIS GROUND IS NOT BEING ADJUDICATED SEPARATELY. 24 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 36. IN GROUND NO.12 TO 12.3, THE ASSESSEE HAS CHALL ENGED THE TRANSFER PRICING ADJUSTMENT ON ACCOUNT OF INTERNATIONAL TRANSACTION OF PAYMENT OF ROYALTY OF RS.83,96,816/-. 37. FACTS OF THE CASE, IN BRIEF, ARE THAT IN TERMS OF THE TECHNICAL ASSISTANCE AND ROYALTY AGREEMENT THE ASSESSEE PAYS ROYALTY FOR USE OF TECHNICAL KNOW-HOW @ 5%. THE ASSESSEE BENCHMARKED THE AFORESAID TRANSACT ION BY APPLYING THE COMPARABLE UNCONTROLLED PRICE (CUP) METHOD AND SELE CTED CERTAIN COMPARABLES FOR THE PURPOSE OF BENCHMARKING ANALYSI S. HOWEVER, THE TPO/DRP REJECTED THE SAME AND DETERMINED THE ARM'S LENGTH R OYALTY RATE AT 4.50%. 38. THE TPO, IN THE REMAND REPORT, PROPOSED THE TRA NSFER PRICING ADJUSTMENT ON ACCOUNT OF PAYMENT OF ROYALTY AMOUNTING TO RS.26 ,51,62,726/-. 39. HOWEVER, THE CIT(A), IN THE IMPUGNED ORDER, FOL LOWING THE ORDER OF AY 2007-08 RESTRICTED THE ARM'S LENGTH ROYALTY RATE TO 4.05% AND ACCORDINGLY MADE AN ADJUSTMENT OF RS.25,19,045/- BEING THE EXCESS AM OUNT PAID BY THE ASSESSEE AS ROYALTY. 40. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND AN Y INFIRMITY IN THE ORDER OF THE LD. CIT(A) WHO HAS DECIDED THE ISSUE BY FOLLOWI NG THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08. IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE AGAINST THE ORDER OF THE TRIBUNAL, THE ORDER OF THE LD. CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND R AISED BY THE ASSESSEE IS DISMISSED. 25 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 41. IN GROUND NO.13 TO 13.3, THE ASSESSEE HAS CHALL ENGED THE DISALLOWANCE OF PAYMENT OF EXPORT COMMISSION OF RS.3,23,53,741/- HO LDING THE SAME TO BE DIVERSION OF PROFITS TO LG ELECTRONICS KOREA ('LGEK '). 42. BRIEFLY STATED, THE FACTS OF THE CASE IS THAT T HE ASSESSEE EXPORTS CTVS TO LG GROUP ENTITIES IN THE MIDDLE- EAST AND SOUTH ASI AN COUNTRIES AND TO SOME UNRELATED DISTRIBUTORS OUTSIDE INDIA. LG ELECTRONIC S KOREA ('LGEK') ASSISTS THE ASSESSEE TO INCREASE THE EXPORT OF CTVS THROUGH ITS HUGE MARKETING NETWORK ACROSS THE GLOBE. THE ASSESSEE PAYS COMMISSION @ 4. 50% OF THE EXPORTS OF CTVS MADE TO VARIOUS ENTITIES IN MIDDLE-EAST AND SO UTH ASIAN COUNTRIES. WE FIND THE ISSUE IS COVERED AGAINST THE ASSESSEE BY T HE ORDER OF THE TRIBUNAL FOR A.Y. 2007-08 IN ASSESSEES OWN CASE. ACCORDINGLY, THESE GROUNDS ARE DISMISSED. 43. IN GROUNDS NO.14 TO 14.5, THE ASSESSEE HAS CHAL LENGED THE ORDER OF THE LD. CIT(A) IN MAKING TRANSFER PRICING ADJUSTMENT OF RS. 154,86,06,527/-. 44. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE DURING THE RELEVANT PREVIOUS YEAR INCURRED ADVERTISEMENT AND SALES PROM OTION EXPENSES (AMP) EXPENSES AGGREGATING TO RS.288,97,64,000/- (INCLUDI NG RS.5,53,14,216/- TOWARDS CONTRIBUTION IN RESPECT OF GCC CRICKET SPONSORSHIP) FOR THE PURPOSE OF IT'S BUSINESS. 45. AGAINST THE AFORESAID ADJUSTMENT MADE BY THE TP O, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A) WHO SOUGHT A REPORT FR OM THE TPO FOR 26 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 BENCHMARKING THE INTERNATIONAL TRANSACTION FOR ASSE SSMENT YEAR 2005-06 & 2006-07 ON THE BASIS OF APPROACH ADOPTED BY THE TPO IN ASSESSMENT YEAR 2007- 08. THE TPO VIDE REPORT DATED 16.10.2014 PROPOSED T O ENHANCE THE ADJUSTMENT ON ACCOUNT OF AMP EXPENSES TO RS. 198,50,28,757/- B Y APPLYING THE BRIGHT LINE TEST BY COMPARING THE AMP/SALES RATIO OF THE ASSESS EE AT 5.73% AS AGAINST THE RATIO OF 1.39% OF THE COMPARABLE COMPANIES. THE CI T(A), HOWEVER, DISALLOWED 50% OF THE EXPENDITURE INCURRED BY THE ASSESSEE ON AMP EXPENSES INSTEAD OF THE EXPENDITURE IN EXCESS OF 1.39% OF SALES UNDER S ECTION 37(1) OF THE ACT ON THE GROUND THAT SUCH EXPENDITURE IS IN RESPECT OF B ENEFITS ACCRUING TO THE ASSOCIATED ENTERPRISES. ACCORDINGLY, THE CIT(A) ENH ANCED THE DISALLOWANCE ON ACCOUNT OF AMP EXPENSES BY RS.112,41,00,189/- BY HO LDING AS UNDER :- '32. AS IT IS NOT POSSIBLE EXACTLY TO MEASURE THE B ENEFIT WHICH HAS ACCRUED AND ARISEN TO THE PARENT COMPANY OF THE APPELLANT AND CONVERSE LY THE UNNECESSARY EXPENDITURE INCURRED BY THE APPELLANT COMPANY FOR THE BENEFIT O F ITS PARENT COMPANY AND BECAUSE OF THE COMPLETE CONTROL OF THE AFFAIRS OF THE APPEL LANT BY ITS PARENT COMPANY SO MUCH SO THAT THE OFFICERS OF THE APPELLANT COMPANY ARE I NVARIABLY THE EMPLOYEES OF THE PARENT COMPANY OF THE APPELLANT AND HAVE BEEN DEPUT ED, DEPLOYED AND ASSIGNED TO RUN AND CONTROL THE APPELLANT FOR THE BENEFIT OF TH E PARENT COMPANY OF THE APPELLANT; IT IS HELD THAT INSTEAD OF A FACTOR OF 1.39%, THE 50% OF THE EXPENDITURE INCURRED BY THE APPELLANT ON ADVERTISEMENT, MARKETING AND PROMOTION EXPENSES IS IN RESPECT OF BENEFITS ACCRUING TO THE PARENT COMPANY OF THE APPE LLANT AND THEREFORE NOT NECESSARY FOR THE EXIGENCIES OF THE BUSINESS OF THE APPELLANT . 33. IN VIEW OF THE ABOVE THE 50% OF THE EXPENDITURE CLAIMED BY THE APPELLANT FOR ADVERTISEMENT, MARKETING AND PROMOTIONAL EXPENSES I S DISALLOWED AND ADDED TO THE INCOME OF THE APPELLANT.' 46. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CIT(A) HAS CONFIRMED/ENHANCED THE ADJUSTMENT ON ACCOUNT OF AMP EXPENSES MERELY ON THE BASIS OF ASSUMPTION THAT 50% OF THE BENEFITS ARISIN G FROM THE AMP EXPENSES 27 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 INCURRED BY THE ASSESSEE IS IN RESPECT OF THE BENEF ITS ACCRUING TO THE ASSOCIATED ENTERPRISE AND THAT THE ASSOCIATED ENTERPRISE HAS C OMPLETE CONTROL OF THE AFFAIRS OF THE ASSESSEE. 47. HE SUBMITTED THAT THE APPROACH OF THE CIT(A) IS NOT IN ACCORDANCE WITH LAW FOR THE FOLLOWING REASONS: (A) THE ASSESSEE HAS EXCLUSIVE RIGHT TO MANUFACTURE AND SELL PRODUCTS BEARING 'LG' BRAND IN INDIA AND THE BENEFIT OF ADVE RTISEMENT AND BRAND PROMOTION EXPENSES INCURRED IN INDIA TO THE A SSESSEE IN THE FORM OF HIGHER SALE AND CONSEQUENTLY HIGHER PROFIT. (B) THE ASSESSEE INCURS ADVERTISEMENT EXPENDITURE T O PROMOTE ITS OWN SALES AND THEREBY THE PROFITS OF ITS OWN BUSINESS A ND NOT FOR BRAND- BUILDING OF OTHER GROUP ENTITY. THE DIRECT ADVANTAG E FROM PROMOTION OF BRANDS IN INDIA WAS TO THE ASSESSEE AN D NOT TO OWNER OF THE BRAND SINCE THE SAID EXPENSE RESULTED IN INC REASE IN SALES AND CONSEQUENTLY PROFITS OF THE APPELLANT IN INDIA. (C) THE ADVERTISEMENT AND MARKETING EXPENSES ARE RE QUIRED TO BE INCURRED TO SURVIVE IN A HIGHLY COMPETITIVE MARKET AND HAVE DIRECT NEXUS WITH THE SALES OF PRODUCTS IN INDIA. (D) THE ADVERTISEMENT AND SELLING EXPENSES HAVE BEE N INCURRED BY THE ASSESSEE COMPANY ONLY ON THE PRODUCTS MANUFACTURED AND SOLD BY THE ASSESSEE IN INDIA. THE ASSESSEE IN THE ADVERTI SEMENTS PROMOTES THE SALE OF PRODUCTS AND NOT THE BRAND NAME OF THE ASSOCIATED ENTERPRISE. (E) IT IS A SETTLED PROPOSITION OF LAW THAT NO PART OF ANY EXPENDITURE INCURRED BY THE ASSESSEE WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS CAN 28 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 BE DISALLOWED EVEN IF SUCH EXPENDITURE RESULTS IN A NY INCIDENTAL OR INDIRECT BENEFIT TO THE ASSOCIATED ENTERPRISES. 48. IN VIEW OF THE ABOVE, HE SUBMITTED THAT SALES P ROMOTION AND ADVERTISEMENT EXPENDITURE IS INCURRED BY THE APPELL ANT WHOLLY AND EXCLUSIVELY IN CONNECTION WITH ITS OWN BUSINESS IN INDIA AND IS NOT AT ALL GUIDED BY THE ALLEGED MOTIVE OF PROMOTING THE BUSINESS INTEREST O F ITS OVERSEAS GROUP COMPANY. RELYING ON VARIOUS DECISIONS, HE SUBMITTE D THAT THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTAINING THE ADDITION. HE FURTHER S UBMITTED THAT THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 DELETED SIMILAR ADJUSTMENTS MADE BY THE TPO. 49. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 50. AFTER HEARING BOTH THE SIDES, WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSME NT YEAR 2007-08. THE TRIBUNAL VIDE ITA NO.5140/DEL/2011 ORDER DATED 08.1 2.2014 HAS DECIDED THE ISSUE AND RESTORED THE SAME TO THE FILE OF THE ASSE SSING OFFICER/TPO FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH SPECIAL BENCH V ERDICT. THE RELEVANT OBSERVATION OF THE TRIBUNAL AT PARA 4 READS AS UNDE R :- 4. GROUND NO.3 IS AGAINST MAKING OF ADDITION TOWAR DS TRANSFER PRICING ADJUSTMENT AMOUNTING TO ` 1,82,71,11,446/- IN RELAT ION TO THE ADVERTISEMENT, MARKETING AND SALES PROMOTION (AMP) EXPENSES. HERE, IT IS PERTINENT TO MENTION THAT A SPECIAL BENCH WAS CONSTITUTED ON THIS ISSUE IN TH IS VERY APPEAL. AN ORDER DATED 29 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 23.1.2013 HAS SINCE BEEN PASSED BY THE SPECIAL BENC H AS LG ELECTRONICS PVT. LTD. VS ACIT (2013) 140 ITD 41 (DEL) (SB). TWO QUESTIONS WE RE REFERRED TO THE SPECIAL BENCH. THE FIRST QUESTION HAS BEEN ANSWERED BY HOLD ING THAT THE TRANSFER PRICING ADJUSTMENT IN RELATION TO THE AMP EXPENSES INCURRED BY THE ASSESSEE FOR CREATING OR IMPROVING THE MARKETING INTANGIBLES FOR AND ON BEHA LF OF ITS FOREIGN ASSOCIATED ENTERPRISES, IS PERMISSIBLE. THE SECOND QUESTION AS TO WHETHER THE ASSESSEE SHOULD HAVE EARNED A MARK-UP FROM ITS AE IN RESPECT OF SUC H AMP EXPENSES INCURRED FOR AND ON BEHALF OF THE AE, HAS ALSO BEEN ANSWERED BY EVEN TUALLY RESTORING THE MATTER TO THE FILE OF TPO FOR DE NOVO ADJUDICATION IN THE LIGHT O F CERTAIN GUIDELINES OUTLINED IN THE ORDER. NOW, THIS DIVISION BENCH IS BOUND BY THE SPE CIAL BENCH DECISION AND CANNOT TINKER OR AMEND THE CONCLUSIONS SO DRAWN, AS WAS AR GUED BY THE LD. AR IN AN ATTEMPT TO PERSUADE US FOR RE-DECIDING THIS ISSUE OR SENDIN G IT BACK TO THE AO/TPO FOR A FRESH DECISION AS PER LAW. IN FACT, THE SPECIAL BENCH ORD ER, PASSED IN THIS APPEAL ALONE, CONSTITUTES AN INTEGRAL PART OF THIS ORDER. RESPECT FULLY FOLLOWING THE VIEW TAKEN BY THE SPECIAL BENCH, WE SEND THE MATTER BACK TO THE TPO/A O FOR DECIDING IT IN ACCORDANCE WITH THE SPECIAL BENCH VERDICT. ACCORDINGLY, GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSES. 51. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNA L IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007-08 WHICH HAS BEEN DECIDED EARLIER I.E. PRIOR TO ASSESSMENT YEARS 2005-06 AND 2006-07, WE DEEM IT PR OPER TO RESTORE THE ISSUE TO THE FILE OF THE ASSESSING OFFICER/TPO FOR FRESH ADJ UDICATION OF THE ISSUE IN THE LIGHT OF THE DECISION OF THE TRIBUNAL FOR ASSESSMEN T YEAR 2007-08. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 52. GROUND NO.15 BY THE ASSESSEE READS AS UNDER :- 15. THAT THE CIT(A) ERRED ON FACTS AND IN LAW IN C ONFIRMING THE DISALLOWANCE MADE BY THE TPO/AO OF RS.51,244,116 IN RESPECT OF S PONSORSHIP PAYMENT MADE TO GCC WITHOUT ADJUDICATING THE SAME IN THE ORDER. FU RTHER, THE DISALLOWANCE IS CONFIRMED IGNORING THE FACT THAT THE SAME ISSUE HAS BEEN DECIDED BY THE HONBLE ITAT IN FAVOUR OF THE APPELLANT IN ASSESSMENT YEAR 2003- 04 & 2004-05. 53. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND WAS NOT ADJUDICATED BY THE LD. CIT(A). WE, THEREFORE, RESTORE THE ISSUE T O THE FILE OF THE LD. CIT(A) WITH 30 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 A DIRECTION TO ADJUDICATE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOL D AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR ST ATISTICAL PURPOSES. 54. GROUND NO.16 DOES NOT REQUIRE ANY ADJUDICATION SINCE THE ISSUE HAS ALREADY BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER/TPO. 55. GROUNDS NO.16.1 TO 16.3 WERE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE FOR WHICH LD. DR HAS NO OBJECTION. ACCORD INGLY, THESE GROUNDS ARE DISMISSED. 56. GROUND NO.17 RELATING TO PENALTY PROCEEDINGS U/ S 271(1)(C) BEING PREMATURE AT THIS JUNCTURE IS DISMISSED. ITA NO.3613/DEL/2017 (A.Y. 2006-07) : 57. GROUND NO.1 BEING GENERAL IN NATURE IS DISMISSE D. 58. IN GROUND NO.2 TO 2.11, THE ASSESSEE HAS CHALLE NGED THE ORDER OF THE LD. CIT(A) IN MAKING DISALLOWANCE OF RS.210,22,81,553/- U/S 40(A)(IA) BY ENHANCING INCOME U/S 251(1)(A) OF THE I.T. ACT. 59. AFTER HEARING BOTH THE SIDES, WE FIND THESE GRO UNDS ARE IDENTICAL TO GROUNDS NO.2 TO 2.11 IN ITA NO.3612/DEL/2017. WE H AVE ALREADY DECIDED THE ISSUE AND THE GROUNDS RAISED BY THE ASSESSEE HAVE B EEN ALLOWED. FOLLOWING SIMILAR REASONING, THE ABOVE GROUNDS BY THE ASSESSE E ARE ALLOWED. 31 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 60. GROUND NO.3 BY THE ASSESSEE RELATES TO SALES-TA X SUBSIDY OF RS.59,17,48,717/- AS TAXABLE REVENUE RECEIPT AS AGA INST CAPITAL RECEIPT TREATED BY THE ASSESSEE. 61. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUND NO.3 IN ITA NO.3612/DEL/2017. WE HAVE ALREADY DECI DED THE ISSUE AND THE GROUND HAS BEEN DISMISSED. FOLLOWING SIMILAR REASO NING THIS GROUND BY THE ASSESSEE IS DISMISSED. 62. GROUND NO.4 RELATES TO DISALLOWANCE OF PROVISIO N FOR SERVICE WARRANTY AMOUNTING TO RS.5,05,62,710/-. 63. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUND NO.4 IN ITA NO.3612/DEL/2017. WE HAVE ALREADY DECI DED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED. FO LLOWING SIMILAR REASONING THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 64. GROUND NO.5 RELATES TO DISALLOWANCE OF ROYALTY AMOUNTING TO RS.107,47,71,000/- PAID TO LG ELECTRONICS INC. KORE A TREATING THE SAME AS CAPITAL EXPENDITURE. 65. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUND NO.5 IN ITA NO.3612/DEL/2017. WE HAVE ALREADY DECI DED THE ISSUE AND THE GROUND RAISED BY THE ASSESSEE HAS BEEN ALLOWED. FO LLOWING SIMILAR REASONING THIS GROUND RAISED BY THE ASSESSEE IS ALLOWED. 32 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 66. GROUND NO.6 RELATES TO DISALLOWANCE OF EXPORT C OMMISSION OF RS.9,91,57,209/-. 67. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUND NO.6 IN ITA NO.3612/DEL/2017. WE HAVE ALREADY DECI DED THE ISSUE AGAINST THE ASSESSEE. FOLLOWING SIMILAR REASONING, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 68. GROUND NO.7 RELATES TO DISALLOWANCE OF CLAIM OF DEDUCTION U/S 80JJAA AMOUNTING TO RS.1,81,57,110/-. 69. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU ND IS IDENTICAL TO GROUND NO.7 IN ITA NO.3612/DEL/2017. WE HAVE ALREADY DECI DED THE ISSUE AGAINST THE ASSESSEE. FOLLOWING SIMILAR REASONING, THIS GROUND RAISED BY THE ASSESSEE IS DISMISSED. 70. GROUND NO.8 AND 9 BEING GENERAL IN NATURE ARE D ISMISSED. 71. IN GROUND NO.10 TO 10.3, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A) IN HOLDING THE ARMS LENGTH RATE FOR INTERNA TIONAL TRANSACTION OF PAYMENT OF ROYALTY AT 4.05% AS AGAINST ROYALTY PAID @ 5% BY THE ASSESSEE. 72. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS ARE IDENTICAL TO GROUND NO.12 TO 12.3 IN ITA NO.3612/DEL/2017. WE H AVE ALREADY DECIDED THE ISSUE AGAINST THE ASSESSEE. FOLLOWING SIMILAR REAS ONING, THESE GROUNDS RAISED BY THE ASSESSEE ARE DISMISSED. 33 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 73. IN GROUND NO.11 TO 11.3, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A) IN MAKING TRANSFER PRICING ADJUSTMENT OF RS. 9,91,57,209/- IN RESPECT OF INTERNATIONAL TRANSACTION OF PAYMENT OF EXPORT COMM ISSION HOLDING THAT SUCH EXPENDITURE WAS NOT NECESSARY FOR THE BUSINESS OF T HE ASSESSEE. 74. AFTER HEARING BOTH THE SIDES, WE FIND THIS GROU NDS ARE IDENTICAL TO GROUND NO.13 TO 13.3 IN ITA NO.3612/DEL/2017. WE HAVE ALR EADY DECIDED THE ISSUE IN PRECEDING PARAGRAPH AND THE GROUNDS RAISED BY THE A SSESSEE HAS BEEN DISMISSED. FOLLOWING SIMILAR REASONING, THESE GROUNDS RAISED B Y THE ASSESSEE ARE DISMISSED. 75. IN GROUND NO.12 TO 12.5, THE ASSESSEE HAS CHALL ENGED THE ORDER OF THE LD. CIT(A) IN MAKING TRANSFER PRICING ADJUSTMENT AMOUNT ING TO RS.157,84,56,692/- IN RELATION TO AMP EXPENSES. 76. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GROUNDS ARE IDENTICAL TO GROUND NO.14 TO 14.5 IN ITA NO.3612/DEL/2017. WE H AVE ALREADY DECIDED THE ISSUE AND THE MATTER HAS BEEN RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. FOLLOWING SIMILAR REASONING, T HESE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 77. IN GROUND NO.13, THE ASSESSEE HAS CHALLENGED TH E ORDER OF THE LD. CIT(A) IN CONFIRMING THE DISALLOWANCE OF RS.77,24,028/- IN RESPECT OF SPONSORSHIP PAYMENT MADE TO GCC. SINCE THE ISSUE WAS NOT ADJUD ICATED BY LD. CIT(A), THEREFORE, FOLLOWING OUR OBSERVATION IN GROUND NO.1 5 IN ITA NO.3612/DEL/2017, 34 ITA NO.3612/DEL/2017 ITA NO.3613/DEL/2017 WE RESTORE THIS ISSUE TO THE FILE OF THE LD. CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AFTER GIVING DUE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. 78. GROUNDS NO.14 TO 14.3 WAS NOT PRESSED BY THE LD . COUNSEL FOR THE ASSESSEE FOR WHICH LD. DR HAS NO OBJECTION. ACCORDINGLY THE ABOVE GROUNDS ARE DISMISSED AS NOT PRESSED. 79. GROUND NO.15 RELATING TO PENALTY PROCEEDINGS U/ S 271(1)(C) BEING PREMATURE AT THIS JUNCTURE IS DISMISSED. 80. IN THE RESULT, BOTH THE APPEALS FILED BY THE AS SESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF JULY, 2018. SD/- SD/- (KULDIP SINGH) (R. K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 18-07-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI